Question Arafat Business & Management

How are fruit farmers exploited through market mechanisms?

How fruit Farmers are exploited through market mechanism?

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Answer Expert #3853

Market mechanisms are the dynamics by which demand and supply forces influence the quanti-ties of goods and services offered in the market, and the price at which they are exchanged. In a free market economy, market mechanisms work to determine the most efficient combination of factors at which the society’s satisfaction is maximized at minimum cost (Friedman, 1981). Mar-ket mechanisms have their greatest relevance in a perfectly efficient market, where: the number of buyers and sellers is very large so no one agent influences the price; the products supplied by different sellers are of the same quality; complete information is accessible to all; and participants can access each other without barriers (Poitras, 2013).

Seldom are markets perfectively efficient, and the agricultural industry is prone to many of these inefficiencies. Fruit growers are particularly vulnerable, because the seasonality of the harvest and the perishability of goods opens but a small window where and when fresh fruit can be sold at top quality (FAO, 2016). Transporting fresh produce from the farm to urban markets creates a logistics problem that limits accessibility of both buyers and sellers to each other. Availability of accurate information on projected supply and demand is limited by a variety of causes, from the uncertain nature of weather influencing fruit growth, to inefficient information dissemination even in structured commodities markets that trade in fruit crops. Most importantly, market mech-anisms disadvantage small fruit farmers where large fruit producers command the price and cor-ner the market (Hall & Palma, 2016).

The small fruit farmers are thus exploited when market mechanisms unduly restrict their ability to set their selling prices above their production costs in order to reap a profit. Their market weak-ness are caused by the inefficiencies earlier described that are embedded in the agrifood markets’ structures (Danau, et al., 2011).

References

Danau, A; Flament, J; & Van Der Steen, D 2011 Choosing the Right Strategies for Increasing Farmers’ Market Power: Instruments Put to the Test. Brussels: Collectif Stratégies Alimentaires asbl.

FAO 2016 ‘Fruits and vegetables,’ Food Loss Prevention in Perishable Crops. Retrieved 20 No-vember 2016 from http://www.fao.org/docrep/s8620e/S8620E0a.htm

Friedman, M 1981 Market Mechanisms and Central Economic Planning. The Thomas Jefferson Center Foundation. Washington, DC: The American Enterprise Institute for Public Policy Re-search

Hall, CR & Palma, MA 2016 ‘Chapter II: Marketing,’ Vegetable Resources, Texas A&M AgriLife Extension. Retrieved 20 November 2016 from http://aggie-horticulture.tamu.edu/vegetable/guides/texas-vegetable-growers-handbook/chapter-ii-marketing/

Poitras, G 2013 Commodity Risk Management: Theory and Applications. Abingdon, Oxon: Routledge, an imprint of the Taylor & Francis Group